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Critical Illness Coverage & Life Insurance

The most common reason to purchase life insurance is to provide financial stability for your family in the event of your death and the subsequent loss of your income. Thus, life insurance usually only pays out upon death. However, what happens if instead of dying, you are struck with an illness or disease that results in the same financially precarious situation you worried would accompany your death?

People worried about that scenario can purchase something called critical illness coverage. Critical illness coverage is a supplement to your policy, not a separate life insurance policy. Some companies may add critical illness coverage to your policy for free while others will require you to pay for it; typically though, you should expect to pay for it. Never make any assumptions though; it is always a good idea to inquire whether critical illness coverage is included for free or not.

Critical illness protection will provide you with a one-time lump sum in the event of a life-threatening illness. The illness must be covered under the policy or else the company will refuse to pay any money. To qualify under this coverage, an illness usually has to be life-threatening and/or permanently disabling. Conditions that you often see covered under this coverage include strokes, heart attacks and cancer.

The advantage of having critical illness coverage is clear; if you are struck with a life-threatening illness, your ability to earn a living will be severely compromised. Not only will you not be able to make money, but the odds are that the medical bills will start piling up quickly. A payout under critical illness coverage is very welcome at a time like this. Some forms of insurance coverage specify how their payouts must be used, but the nice thing about critical illness coverage is that there are no restrictions upon the use of the money; you can spend it however you choose. Critical illness insurance doesn’t end just because you retire –it’s available as long as you choose to maintain the coverage. You don’t have to be permanently disabled to get a payout, and you do not have to go through the hassle of showing receipts in order to get reimbursed from your insurance company.

There are a few disadvantages to having critical illness coverage. Critical illness coverage, if not included for free with the policy, may be more expensive than other types of income protection coverage. Also, if you are struck with an illness not covered under the policy, you are out of luck. Before buying critical illness coverage, it may be worth your while to look into short-term or long-term disability insurance, as both kinds of insurance deal with scenarios similar to critical illness coverage.

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